My greatest disappointment after joining academia was to see my most promising students accept jobs at Goldman Sachs or McKinsey. Engineering students with ambitions to save the world would instead become financial analysts—who used their skills to “engineer” our financial system. Or they would take grunt jobs in management consulting—another waste of valuable talent.
Why would they sell their souls? Because they had no choice, the burden of debt they amassed while getting their degrees was just too great. They had six-figure student loans to repay and couldn’t take the risk of joining a startup or founding their own business.
These students were at the Masters of Engineering Management program at Duke University. But it is the same for students I mentor at Harvard and Stanford. Unless they have a full scholarship or very rich parents, they usually have to trade their idealism for financial security. The Wall Street Journal recently brought this issue to life in an article titled Student-Loan Load Kills Startup Dreams.
I can’t blame the students. I would probably do the same if I was in their shoes.
Student loan debt is the reason I don’t advise students who want to become entrepreneurs to apply to elite, expensive colleges. They can be as successful if they go to a relatively inexpensive public college. It is the same in India and China as it is in the U.S. I have done three research projects which reached the same surprising conclusions.
In the first project, we looked at the background of 317 immigrants who started tech companies in the U.S. We expected the vast majority to be from the most prestigious institutions in their home countries such as the Indian Institutes of Technology (IIT) and China’s Fudan and Tsinghua Universities. We were surprised to learn that a public college, Delhi University, graduated twice as many Silicon Valley company founders as did IIT-Delhi. And that two other public colleges, Osmania and Bombay University, trumped nearly all of the other IITs. China’s Tianjin and Shanghai Jiao Tong Universities graduated more Silicon Valley founders than did Fudan and Tsinghua.
These study subjects were immigrants, and we weren’t sure if this would be the same with American graduates. So we looked into the educational background of successful American tech company founders. We found that the 628 U.S.-born tech founders we surveyed received their education from 287 unique universities. Almost every major U.S. university was represented. The top ten institutions in this group accounted for only 19% of the entire sample. To be fair, this shows that top-tier universities are overrepresented in the ranks of entrepreneurs. We also found that Ivy League schools, which graduate 1.6% of American students, were 8% of our sample. The point is that 81% of the tech company founders came from “regular” schools—and don’t bear the same financial burden as the elite.
In a third research project, we looked into the backgrounds of the founders of 549 successful businesses across a number of high-growth industries. The proportion of Ivy-Leaguers was even smaller (about 6% of the sample). We also found that MBAs tended to start companies sooner after graduation (13 years after) than bachelor’s degree holders (17 years after). And both these groups were quicker to found startups than PhDs – who typically waited 21 years from the time they graduated to start their ventures. Computer Science/IT grads became entrepreneurs sooner than MBAs (13 years vs. 15 years) and applied science majors (20 years).
The most interesting findings however were the differences between those who had college degrees and those who never completed a bachelor’s degree. The average sales revenue of all startups in one of our samples was around $5.7 million, and these companies employed an average of 42 workers. Startups established by tech founders with Ivy League degrees had average sales and employment of $6.7 million and 55 workers, respectively. The success of these two groups markedly contrasted with startups established by tech founders with only a high school degree. Those founders had average revenues and employees of $2.2 million and 18, respectively. In other words, it didn’t matter so much if you graduated from an Ivy; what made the greatest difference was having a higher degree.
Entrepreneurs also told us that they really value their education: 70.3% said their university education was important. Ivy League graduates valued their education even more, with 85.7% indicating that it was important. Surprisingly only 18.8% believed that university or alumni networks were important. Of the Ivy graduates, 28.6% ranked these networks as important.
My message to students is that if you want to become an entrepreneur and save the world, definitely don’t skip college. But go to a school that you can afford. You’ll be freed from the chains of debt and succeed on your own ambition and merit.